E-wallets: Pluses & minues

For the uninitiated, this customised couplet roughly means there's only so much traction that payment wallets like PayTM, Freecharge, Citrus, Oxigen, MobiKwik, PayU, et al can get through cashback offerings. Ultimately, to have a sustainable business model, and to increase their share in the marketplace, they need to resort to tactics that make the wallets relevant to the users on a regular basis. Admits Ankur Saxena, CEO, Oxigen Wallet, "Cashbacks have spoilt the users. As an industry, we thought it would make using wallets a habit. Clearly that wasn't the best move by any of us because during cashbacks you saw a sudden spike in transactions. But without them, the number of transactions reduces to 2% of that figure."

How to prevent digital suicide?In any case, continuing on the cashbacks treadmill would've meant digital suicide — the kind that e-commerce players have been attempting with much success for a while now. So, what are the players doing besides cashbacks to guard their backs?

1)PayTM has taken the customer acquisition route by getting into the e-commerce zone and is threatening to beat Flipkart, Amazon and Snapdeal at their game.

2) Freecharge got itself a strong anchor merchant in Snapdeal post its acquisition and is trying to use that to its advantage.

3) Players like Olacabs are going for customer retention by launching their own independent wallets (Ola Money). Such wallets ensure 100% success rate for transactions as opposed to third party wallets aligned to your app. The other utility they have is for parents — they can recharge wallets for their kids and know the money is not being spent elsewhere.

4) Digital payments company TranServ recently launched Udio mobile wallet that comes with the facility of a physical prepaid Visa card that can be used for payments both online as well as offline. Best for people who don't like entering their debit card PIN in public.

5) Oxigen Wallet is trying to leverage its tieups with 2,00,000 retail outlets in the country to encourage users to opt for its Oxigen wallet for payments instead of cash or debit cards.

6) Freecharge, along with introducing a Go card powered by MasterCard, is trying to introduce features like dynamic pin that changes every three seconds, in order to make the checkout of transaction much quicker.

7) PayU Money is thinking of introducing inbuilt password for the app, again to avoid the One Time Passwords and other separate login hassles, to reduce the layers in the transaction process. The aim is to accomplish three things — reduce transaction time, make the transactions more secure, make them more convenient.

Wallet world's dampenersWhile all these efforts look good on paper, there are factors that deter their success. To begin with, there are too many wallets, which means too many apps, too many signins. Wallets need to be inter-operable, just like our debit cards are now: Useable at any ATM booth, with any card-reading machine. That's just hygiene, says Anish Williams, co-founder & CEO of TranServ. Once that's in place, the differentiator would be service, convenience and security. So, to start with, wallets need to figure out partnership models with banks or payment gateways like Visa and MasterCard to get the inter-operability out of the way.

But could these banks be another deterrent? At present, 90% of monetary transactions are cash. Of the rest that happen digitally, 90% are controlled by banks. In order for payment wallets to succeed, they need to collaborate with banks.

But that's not been easy. Both PayTM and Oxigen Wallet have been banned by SBI in the past. Saxena says it doesn't hinder their progress because they're focusing on expanding the user base through more retail outlet collaborations. He also feels payment wallets is a low margin business, one that won't bother traditional banks that much.

Banks like SBI, ICICI, and Axis Bank launching their own payment wallets in the recent past tells a different story though. Says Nitin Gupta, co-founder and CEO of PayU India, "Banks see wallet as a threat." That's because as they gain traction, they stand to take online transactions away. PayU, however, is seen as a partner by the same banks, says Gupta, because the offering is faster checkout — which can happen in direct alignment with a bank's payment wallet as well. "I can provide them fin-tech to compete with the third party wallets and become the first choice for consumers," he says. So, if you ask Gupta, he'll tell you the wallet business is not sustainable.

His namesake Nitin Misra, VP - products at PayTM disagrees. He explains: When I joined PayTM, I used the wallet for Uber only. I cringed while creating a proper Pay-TM account. But now that I am used to paying for everything via that wallet, I find the convenience addictive." It's true. Imagine not having to pay for anything. No One Time Passwords, no remembering your debit card details, or your netbanking details for online payments. It's pretty convenient, right? Yes, but wallets don't give you interest on money kept in them. That's where PayTM's payment bank license by RBI comes into picture.

As more and more payment wallets start treading on the payment banks path, they'll start giving every benefit of a traditional bank along with convenience that banks are currently only beginning to offer and that only to existing users. No guest checkouts with traditional banks, you see.

Which model is the best of all?So, does the PayTM model win? Gupta doesn't think so. "I have a hunch banks will retaliate. Nothing stops more banks from banning wallets." Govind Rajan, COO of Freecharge, thinks all players can co-exist as long as they have their offerings right. To him, even payment banks don't have so much of an edge over plain payment wallets. "Banks with the highest rate of interest in our country don't have the highest consumer base. Users will only go for payment wallets/banks that provide them faster, safer, more convenient transactions, always."PayTM model win? Gupta doesn't think so. "I have a hunch banks will retaliate. Nothing stops more banks from banning wallets." Govind Rajan, COO of Freecharge, thinks all players can co-exist as long as they have their offerings right. To him, even payment banks don't have so much of an edge over plain payment wallets. "Banks with the highest rate of interest in our country don't have the highest consumer base. Users will only go for payment wallets/banks that provide them faster, safer, more convenient transactions, always."

The way we see it right now, there may be too many e-wallets, but there's too little emoney being spent. All the players need to do their bit to change that before they can decide which model works best.